We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on AMETEK, Inc. (NYSE:AME).
AMETEK, Inc. (NYSE:AME) investors should be aware of a decrease in hedge fund sentiment recently. Our calculations also showed that AME isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ray Dalio of Bridgewater Associates
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the latest hedge fund action surrounding AMETEK, Inc. (NYSE:AME).
Hedge fund activity in AMETEK, Inc. (NYSE:AME)
At Q4’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in AME over the last 18 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the number one position in AMETEK, Inc. (NYSE:AME), worth close to $140.6 million, accounting for 0.1% of its total 13F portfolio. The second most bullish fund manager is GAMCO Investors, managed by Mario Gabelli, which holds a $126 million position; 1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Francois Rochon’s Giverny Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Giverny Capital allocated the biggest weight to AMETEK, Inc. (NYSE:AME), around 7.52% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, designating 3.95 percent of its 13F equity portfolio to AME.
Due to the fact that AMETEK, Inc. (NYSE:AME) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Anand More’s SAYA Management dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, worth about $18.4 million in stock, and Renee Yao’s Neo Ivy Capital was right behind this move, as the fund sold off about $1.3 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as AMETEK, Inc. (NYSE:AME) but similarly valued. These stocks are Best Buy Co., Inc. (NYSE:BBY), Palo Alto Networks Inc (NYSE:PANW), Verisign, Inc. (NASDAQ:VRSN), and Liberty Broadband Corp (NASDAQ:LBRDA). This group of stocks’ market values match AME’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BBY | 25 | 686035 | -3 |
| PANW | 47 | 3168440 | -5 |
| VRSN | 38 | 5872682 | 6 |
| LBRDA | 24 | 821139 | 0 |
| Average | 33.5 | 2637074 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $2637 million. That figure was $810 million in AME’s case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand Liberty Broadband Corp (NASDAQ:LBRDA) is the least popular one with only 24 bullish hedge fund positions. AMETEK, Inc. (NYSE:AME) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately AME wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AME investors were disappointed as the stock returned -22.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
